Fuzzy Logic and Corporate Governance Theories
31 Pages Posted: 10 Nov 2011
Date Written: January 1, 2007
Fuzzy logic is a theory that categorizes concepts or things belonging to more than one group. A methodology that explains how things function in multiple groups (not fully in one group or another) offers advantages when one definition or membership in a group accounts for belonging to multiple groups. A principal/agent model of corporate governance has some characterizations of fuzzy logic theory. The purpose of this article it to evaluate other models of corporate governance that account for the multi-agent role of senior officers of public companies and assess the accountability to the corporation. Corporate governance theorists continue to debate the inefficiency of agency theory, control costs, the role of management, and corporate purpose. This article furthers that discourse by examining an assumption within the principal/agent model of governance – that senior officers and directors owe the same fiduciary duties. Part II examines the incongruent nature of corporate purpose under the traditional principal/agent model of corporate governance and its role in fostering conflicts between the shareholders’ and the corporations’ interests. Part III then evaluates the stewardship theory. Part IV evaluates the mediating hierarchy theory of corporate governance. Finally Part V examines the judicial standards of review in Delaware – the business judgment rule, enhanced scrutiny, and entire fairness.
Keywords: Fuzzy logic, corporate governance, principal/agent model, agency theory, stewardship theory, mediating hierarchy theory, business judgment rule, enhanced scrutiny, entire fairness
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